Hyland v. Millers Nat. Ins. Co.

• Decision Date: 14 April 1932
• Docket Number: No. 2734.,2734.
• Citation: 58 F.2d 1003
• Court: U.S. District Court — Northern District of California
• Parties: HYLAND v. MILLERS NAT. INS. CO. et al.

58 F.2d 1003 (1932)

HYLAND v. MILLERS NAT. INS. CO. et al.

No. 2734.

District Court, N. D. California, S. D.

April 14, 1932.

Gavin McNab, Schmulowitz, Wyman, Aikins & Brune, and Shortridge & McInerney, and George B. Harris, all of San Francisco, Cal., for plaintiff.

Redman, Alexander & Bacon and R. P. Wisecarver, all of San Francisco, Cal., for defendants Millers Nat. Ins. Co., Dubuque Fire & Marine Ins. Co., National Reserve Ins. Co., and Merchants' Fire Ins. Co.

Percy V. Long and Bert W. Levit, and R. P. Wisecarver, all of San Francisco, Cal., for defendant Firemen's Ins. Co., of Newark, N. J.

Miller & Thornton, of San Francisco, Cal., for defendant Western Ins. Co., of America.

Orrick, Palmer & Dahlquist, of San Francisco, Cal., for defendant National Liberty Ins. Co.

KERRIGAN, District Judge.

This is a suit in equity to ascertain and apportion the liability of the several defendant insurance companies upon a fire loss to a stock of merchandise. Plaintiff is a dealer in burlap, and is a manufacturer of burlap bags, liners, etc. A fire occurred in his factory on Sacramento street, San Francisco, on October 19, 1929, resulting in damage to his stock of merchandise, which consisted of manufactured bags, particularly burlap bags and cotton liners, bags in process of manufacture, and materials to be used in manufacture. The policies in suit all cover damage to the stock, and are in the total sum of $185,000. Five policies which total $50,000 are combination specific and excess insurance; one is for $50,000, and is to attach when values are in excess of $50,000; the last group consists of two cover notes written by the National Liberty for $85,000, which call for policies according to the standard statutory form, but which this defendant by a cross-complaint asks to have reformed into excess policies to attach when values exceed $100,000. In addition to this insurance, plaintiff carried $96,000 on furniture, fixtures, and equipment, and $120,000 on use and occupancy, a total of $401,000 insurance. All defendants plead certain special defenses which may be grouped under two heads: First, that plaintiff swore falsely as to his knowledge and belief as to the origin of the fire; and, second, that plaintiff was guilty of fraud and false swearing in connection with his proofs of loss and claims of loss in the pleadings in this action. The five companies writing the first $50,000 of insurance pleaded the additional defense that an appraisement of the loss was not had under the terms of the policy due to the acts of plaintiff. The Western pleads the additional defense that its policy is for damage in excess of $50,000, and that the loss was less than that amount. The National Liberty, in accordance with its prayer for reformation, pleads that it is only liable if values were in excess of $100,000 and for damages in excess of $100,000.

Considering the first defense, the evidence clearly shows that this was a "set" fire and that plaintiff knew it when making his proof of loss. The fire occurred on Saturday evening, October 19, 1929. It had reached sufficient proportions to be detected and the alarm rung by 10:36 o'clock. Plaintiff and his manager of the factory, Miss Mitchell, were the only ones in the factory in the late afternoon; they were there continuously until they left at about 6:30, except for an hour between 4 and 5 when plaintiff went for a walk because of a headache. After Miss Mitchell had gone through the factory locking the windows, they locked the factory and went to their homes. Plaintiff was informed of the fire by phone, notified Miss Mitchell, and returned with her to the factory about 11 p. m. The fire lasted but a short time after the alarm was responded to, according to the fire department officials in charge of extinguishing it. The following morning plaintiff returned to the factory, as did the representatives of the fire department, the police department, and fire patrol. Because the fire had apparently started in several different places, and because of a pervading smell of kerosene, the fire patrol and the police department were investigating a charge of incendiarism. Plaintiff was advised of this, and asked who might have set the fire. He suggested three discharged employees who might have grievances against him. His attention was directed to the various suspicious circumstances apparent after the fire which I shall mention.

The witnesses testifying to the circumstances surrounding the fire are of two groups; the chiefs of the fire department in charge of fighting the fire and the men in charge of the fire patrol. Plaintiff has vigorously attacked the credibility of the latter witnesses on the ground of bias and interest. Their positions are created by law, but their salaries are paid by the Underwriters' Fire Patrol of San Francisco. It is their duty to keep down loss by protecting stocks of goods from water damage and to investigate fires which are apparently of incendiary origin. The testimony of these men has, on so many material points, been corroborated by the fire chiefs, who are entirely disinterested witnesses, that I do not believe that their credibility has been shaken. The circumstances testified to show that there were four separate and distinct fires. In all but one there was evidence that kerosene had been used to start them. One fire originated on the first floor in back of the office and spread to the mezzanine. The fire started in a pile of burlap bags which had been soaked in kerosene. The kerosene had seeped through the floor and had soaked into bales of burlap directly under this in the basement. The principal fire was in the stair well and started on the second floor. This fire was entirely separate from the one just described. It was some thirty feet away, and the door leading from the first floor to the stair well had been closed. There was no burning between. The type and depth of the burning of wood in the stair well indicated that it was a "flash" fire or gas fire such as would result from the burning of the volatile gas kerosene gives off. The stair well showed little or no evidence of burning between the first and second floors. On the second floor just outside the stair well, near the open door leading to it, was a shallow pan of kerosene with cut pieces of burlap soaked in it. Another pan of kerosene was found on the same floor about sixteen feet away. There was another fire on the second floor in some bales of burlap across the room from the stair well fire. Its origin was unexplained, and there was no burning between the fires. On the third floor apparently another fire had been started near the stair well. There was a drum of kerosene in which a hole had been punctured near the bottom standing by the door to the stair well. Some oil seeped out, but, as the cap had not been removed from the top, it did not flow freely and became "air bound." On this same floor there was another drum of kerosene on its side, with several holes punctured about three inches from the floor. The kerosene had saturated the floor nearby for a distance of four or five feet. The fire did not reach this location. The fire in the stair well burned up into the fourth floor, where it mushroomed to the ceiling and burned through to the roof. Significantly, the pans filled with kerosene and rags did not belong where they were found, but belonged under certain machinery, and the drums of kerosene had been dragged up from the basement. That the incendiarist was an amateur was shown by his leaving the caps on the drums and by his failing to open the windows and thus feed the fire with the necessary oxygen.

What might be deemed a further suspicious circumstance is the total amount of insurance carried upon the stock of merchandise. I find that the value of the stock at the time of the fire was approximately $88,000; yet, according to plaintiff's own theory of the insurance involved in this suit, he carried insurance on the stock amounting to $185,000. I am unable to say from the record in this case that the insurance on equipment and use and occupancy was excessive as was argued.

It is not an issue in the case, nor is it claimed by defendants that plaintiff set the fire or had guilty knowledge of the incendiarism. The evidence was introduced to establish that plaintiff knew that the fire was of incendiary origin when he swore to the proofs of loss. The policy required the assured to state in the proof of loss his knowledge and belief as to the origin of the fire. Plaintiff stated therein that the origin of the fire was unknown to him. Since the evidence of incendiarism was equally well known to both plaintiff and defendants, and plaintiff knew that, there was no deception accomplished and perhaps none intended. I do not believe that this defense would alone justify a denial of recovery to plaintiff.

I have gone into this evidence thus in detail because the suspicious circumstances surrounding the fire may be considered in connection with the defense of fraud and false swearing as to values where the estimate of value in the claim of loss is grossly excessive. Orenstein v. Star Insurance Company, 10 F.(2d) 754, 757 (C. C. A. 4).

The principal defense relied upon by all of the defendants is that plaintiff was guilty of fraud and false swearing in making his claim as to the extent of his loss. The statutory standard form of fire insurance policy in California provides that "this entire policy shall be void — (b) in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after the loss." It is set up in separate defenses that there was fraud and false swearing, first, in making proof of loss in the sum of $73,601.96; second, in claiming loss in the sum of $76,498.62 in the original complaint in this action; and, third, in claiming loss in the sum of $106,992.83 in the amended complaint. Finally it...